Suppose a Borrower and Lender Agree to an Interest Rate

question 110

Multiple Choice

Suppose a borrower and lender agree to an interest rate on a loan when inflation is expected to be 6%.The borrower would benefit the most if which of the following inflation rates actually occurred?

• A)0%
• B)3%
• C)6%
• D)9%

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Definitions:

Five-Year Renewal

Typically refers to the option or requirement to renew a contract, license, or agreement for an additional five-year period.

Mechanical Engineer

A professional who applies principles of physics and materials science for the design, analysis, manufacturing, and maintenance of mechanical systems.

Valid Contract

A contract that results when the elements necessary for contract formation (agreement, consideration, contractual capacity, and legality) are present.

Unilateral Contract

A contract that results when an offer can be accepted only by the offeree’s performance.